Pimco: More Growth May Spark ‘Mutiny’ at Fed

At least two members of the Federal Open Market Committee may vote against extending a stimulus program if the pace of U.S. economic growth climbs, according to Pacific Investment Management Co.’s Anthony Crescenzi.

“Three votes against an action by the chairman is mutiny,” Crescenzi, 46, a portfolio manager and strategist at Newport Beach, California-based Pimco, said in a Bloomberg Radio interview on “Bloomberg Surveillance” with Tom Keene. “It’s looking as if there will be at least two lining up against an extension of the program.”

Federal Reserve Bank of Philadelphia President Charles Plosser and Dallas Fed President Richard Fisher may dissent if growth accelerates and the policy-setting FOMC still moves to extend its program to spur the economy by buying $600 billion of Treasurys, Crescenzi said. The plan, a strategy called quantitative easing, is scheduled to end in June.

Plosser and Fisher are among the FOMC’s voting members this year. There hasn’t been more than one dissenting vote at a policy meeting since April 2008.

The U.S. economy expanded in the fourth quarter at a 3.2 percent annual rate as consumer spending climbed by the most in four years. Crescenzi said growth of 3.5 percent to 4 percent and a drop in unemployment might trigger the dissent.

Fisher said in a speech yesterday the Fed is “pushing the envelope” with its purchases of U.S. government debt and that he’d probably oppose any proposal to do more. Richmond Fed President Jeffrey Lacker — who doesn’t vote this year on the FOMC — said in a speech that policy makers need to take “quite seriously” their commitment to review the program as the U.S. recovery quickens.

‘Effectively’ a Cut

“We’d expect them again to vote against what is effectively an interest-rate cut, purchase of Treasury securities,” Crescenzi said of Plosser and Fisher.

Treasurys rallied today as Bernanke told the House Budget Committee that while the recovery has strengthened, unemployment will remain high “for some time.” Yields on the benchmark 10-year note fell nine basis points, or 0.09 percentage point, to 3.65 percent, after rising 11 basis points yesterday.

At least two members of the Federal Open Market Committee may vote against extending a stimulus program if the pace of U.S. economic growth climbs, according to Pacific Investment Management Co. s Anthony Crescenzi. Three votes against an action by the chairman is mutiny, ...